Innovation Policies Under Economic Complexity

Christian Chacua, Shreyas Gadgin Matha, Matte Hartog, Ricardo Hausmann and Muhammed Yildirim

No 20678, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Recent geopolitical challenges have revived the implementation of industrial and innovation policies. Ongoing discussions focus on supporting cutting-edge industries and strategic technologies, but hardly pay attention to their impact on economic growth. In light of this, we discuss the design of innovation policies to address current development challenges while considering the complex nature of productive activities. Our approach conceives economic development and technological progress as a process of accumulation and diversification of knowledge. This process is limited by the tacit nature of knowledge and by countries’ binding constraints to growth. Consequently, effective innovation policies should be place-based and multidimensional, leveraging countries’ existing capabilities and addressing countries’ current problems. This contrasts policies that lead to economic efficiencies, such as copying other countries’ solutions to problems that countries do not currently have.

JEL-codes: F60 O25 O30 O38 (search for similar items in EconPapers)
Date: 2025-09
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